Westpac Banking Corporation

WBC Details

Appointed Ms. Anita Fung to the Westpac Board: Westpac Banking Corporation’s (ASX: WBC) stock edged down 0.964 per cent on July 25, 2018 while the group announced the appointment of Ms. Anita Fung to the Board as an independent Non-executive Director, who also became a Member of the Board Risk & Compliance Committee upon her appointment, as well as a Member of Westpac’s Asia Advisory Board. Ms. Anita Fung will be joining the Board on October 01, 2018 after the completion of all relevant regulatory and Australian visa prerequisites. As per the management, Ms. Fung has an extensive exposure in wholesale and retail banking in the Asia-Pacific region. So, the group is expecting her deep and current knowledge of the banking sector as a valuable asset to execute Westpac’s strategic priorities.

 
Momentum building in BT Panorama (Source: Company Reports)

On the other hand, BT Financial Group (BT) is a wholly owned subsidiary of the group and has recently taken three new initiatives i.e., significant pricing changes to its BT Panorama which will provide the strength of the business platform; launching of a ‘compact’ BT Panorama menu which will support all kind of benefits of BT Panorama, with a simpler investment menu. and the last initiative is BT Open Services which will assist advisers and dealer to continue to run professionally, compliant and client-focused advice businesses in a cost-effective way. According to the experts, these packages will provide the positive financial impact for the overall business in the near-future because of its new pricing model which is cheaper than its peer group and the stock has a lot of potential to grow which leads to the positive sentiments in the market. Hence, we maintain our “Buy” recommendation at the current market price of $29.26, given the group’s resilient performance despite challenges in the banking sector.
 

WBC Daily Chart (Source: Thomson Reuters)
 

Woodside Petroleum Limited

WPL Details

Decent FY18 Second Quarter Update:  Woodside Petroleum Limited (ASX: WPL) has recently released its second-quarter report for the period ending 30 June 2018 in which the company disclosed about the Ferrand-1 exploration well in WA-404-P area that was completed during the period. Further, the Ferrand-1 exploration well intersected a 69 m gross gas column. As of now, the assessment is in progress. Further, the company delivered production of 22.1 MMboe and sales revenue of $1,082 Mn during the period. The key highlight of the period was the start-up of LNG production from Wheatstone Train 2. From the beginning of the June month, Wheatstone Train 2 has accomplished high production rates, building on the continuing operational success at Train 1. Further, the output from Wheatstone, along with oil and gas from the Greater Enfield and Greater Western Flank Phase 2 developments, will contribute to the targeted production of approximately 100 MMboe in 2020. The Group inked a non-binding MOU for the supply of approximately 125 TJ/d of domestic gas over 20–25 years supported by the proposed Scarborough development. The Group received tender responses for key contracts supporting the SNE Field Development-Phase 1, offshore Senegal.
 

Quarterly Production Highlights (Source: Company Reports)

Besides this, it is anticipated that the Group will enter into a preliminary tolling agreement between the NWS Project participants and Browse Joint Venture in Q3 2018. With regards to Scarborough development, the Group has increased target ready for start-up to FY23 for the upstream component and FY24 for the downstream to emphasize the market opportunity. We expect that the company has potential to grow further at the back of ongoing developments, resulting into the top-line growth of the company in the years to come. ROE stood at 3.4% in 1HFY18 and debt-to-equity ratio came at 0.34x which is lower than the industry median (0.53x).The stock price climbed up 9.06 per cent in the past three months and is trading close to 52-week higher level. Hence, we maintain our “Hold” position on the stock at the current market price of $34.660, considering the aforesaid update and the current trading level in view of sustainable performance despite market volatility.
 

WPL Daily Chart (Source: Thomson Reuters)
 

BHP Billiton Limited

BHP Details

Achieved Full Year Guidance for All Business Segments: BHP Billiton Limited’s (ASX: BHP) stock climbed up 2.242 per cent on July 25, 2018 at the back of positive market news and base metal rebound. BHP has agreed to deliver final labour contract offer to its workers’ union amid tensed contract negotiations ahead of a possible strike. The group lately released its operational update for the year ended 30 June 2018 in which the group achieved the full-year production guidance for its segments i.e., petroleum, copper, iron ore and energy coal and also achieved its revised guidance for metallurgical coal. As per the release, the group reported a rise of 8% in annual production and record yield at Iron Ore in Western Australia, Queensland Coal and at its Spence copper mine in Chile. During the quarter, the Group approved US$2.9 Bn in capital expenditure for the South Flank sustaining iron ore project in Western Australia (WA) and recorded a rise of US$122 Mn in the budget of the Jansen project to US$2.7 Bn which has been incorporated to fund support services at the site as work continues to the completion of the shafts. As of now, the group has 5 major projects under development in its segment i.e., petroleum, copper, iron ore and potash, with the combined budget of US$10.6 Bn over the life of the projects.


Operational performance (Source: Company Reports)

Moreover, the Group further simplified the portfolio with the announced divestment of Cerro Colorado in Chile and Gregory Crinum in Australia and its investment in South Flank supports its ability to supply low cost, high-quality products into Asia. On the financial front, RoE and RoIC substantially increased from 4.7% and 2.7% to 6.7% and 4.5%, respectively in 1HFY18 over the six months’ period. As a result, the company recorded Current ratio and Quick ratio at 1.75x and 1.40x, respectively in 1HFY18 while debt to equity came down to 0.49x from 0.53x during the same period. As of now, we maintain our “Hold” recommendation at the current market price of $33.750, considering trading level and commodity price movement.
 

BHP Daily Chart (Source: Thomson Reuters)
 

QBE Insurance Group Limited

QBE Details

Positive Outlook: QBE Insurance Group Limited (ASX: QBE) is an Australia based international property and casualty insurance company. The key objective of the group is to build the strongest partnerships with customers such as brokers, agents, policyholders, claimants, and trading partners, etc. Lately, the group launched a program called “Brilliant Basics” which will improve the underwriting quality, pricing, and claims in the market in which it operates its every product that it underwrites. QBE expects to achieve the combined operating ratio (COR) in the range of 95.0 per cent - 97.5 per cent in FY18 and investment return in the range of 2.5 per cent to 3.0 per cent given the various initiatives undertaken by the
group.


Business Target (Source: Company Reports)

Further, the group is committed to reshaping its business which will help to create a stronger and simpler QBE, with the seven priorities for FY18. These priorities are: simplify QBE, brilliant basics, drive performance improvement, further reposition North America, remediate Asia, talent & culture, and build for the future. On the financial front, the premium earned ratio significantly increased from 0.7% to 8.8% in FY17 as compared to prior year. Expense ratio and loss ratio stood at 17.3% and 70.9%, respectively in FY17 while combined ratio recorded at 88.2% which is higher than the prior year. Meanwhile, the stock price climbed up 4.80 per cent in the last one month as at July 24, 2018 and is trading close to 52-week low level ($9.280). Looking at potential in the business and positive market scenario for the insurer, we give a “Buy” recommendation on the stock at the current market price of $10.010.
 

QBE Daily Chart (Source: Thomson Reuters)
 

Wesfarmers Limited

WES Details

Coles’ demerger: Wesfarmers Limited’s (ASX: WES) stock tumbled 1.051 per cent on July 25, 2018 as there might be some profit booking ahead of the full-year result which is expected to be announced on August 15, 2018. Lately, the group announced an update on Coles demerger wherein Wesfarmers' shareholders will receive 1 Coles share for every Wesfarmers share held and it is expected to be completed by November 2018, subject to shareholder and other approvals. As per the release, WES will retain 15% stake of the supermarket giant “Coles” and 50% of its flybuys business. Further, the management instructed that Coles will be demerged with a robust balance sheet with Net debt of about $2 Bn, which it believes to support a strong Baa1/BBB+ credit rating with substantial headroom. With regards to the profit, the Coles business plans to take the Wesfarmers’ long-established approach. This will see a dividend payout ratio in the range of 80 per cent to 90 per cent. We expect that this strategic demerger will provide a critical repositioning of the Group’s portfolio which will set up both Wesfarmers and Coles for success throughout the following decade. Meanwhile, the share price was up by 15.47 per cent in the past three months (as at July 24, 2018) and the stock currently is trading at a higher level. Hence, we maintain our “Expensive” recommendation at the current market price of $ 48.970 ahead of the earnings update.
 

WES Daily Chart (Source: Thomson Reuters)

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